Q&A - What exactly are our duties as Trustees of a Discretionary Trust?

Q: My childless Uncle has set up a Discretionary Trust to benefit his nephews and nieces and has appointed me and my sister as Trustees.  The Trust consists of an investment portfolio and two buy to let properties administered by a property management company.  As Trustees, what are our duties?

A: As Trustees you and your sister have a duty to maintain the assets within the Trust for the benefit of the beneficiaries.  The investment portfolio should be in your names and the investment management company should report regularly to you on the portfolio’s performance, though you can and should manage the investments within the Trust as if they were your own. 

The properties within the Trust should be registered in your names with the Land Registry, and a restriction should be entered reflecting that the property is held within a Trust.  This protects the asset for the beneficiaries.  If the properties are generating rental income you should be registered with the property management company as the owners and you should set up a separate Trustees bank account to receive the rental income, to keep it separate from your own personal finances.  The Trust should be registered with HM Revenue and Customs for Self-Assessment and any income tax due on the rental income can be paid from the Trustees account.

As well as managing and maintaining the assets of the Trust your responsibilities as Trustees include familiarising yourselves with the Trust document, confirming who the beneficiaries are to be and ensuring the beneficiaries are treated equally and fairly. You must exercise reasonable care when managing the affairs of the Trust and take all precautions which an “ordinary prudent man of business” would take.

Undertaking Trustee duties can be overwhelming and you might find it less onerous a task if you consult with a local solicitor who can advise you regarding your particular circumstances. 

(Article published 02/01/2017)  

Victoria Wilson

Victoria Wilson

Partner

A Partner and Part of our Probate, Wills, Trusts and Tax team in Oswestry

Sarah Kennedy

Sarah Kennedy

Trusts and Probate Executive

Part of our Probate, Wills, Tax and Trusts team in Wrexham